Despite the earnings season on in full swing, airline stocks remained lackluster over the past one week. Improved quarterly results posted by most of the carriers made no significant impact on the industry overall, leading to most of the stocks trading in the red through the week.

Some of the major highlights from the past week include earnings announcements by U.S. and European carriers. In addition, initiation of Virgin America’s IPO launch and hefty fines imposed on Southwest Airlines Co. (LUV-Free Report) for non-compliance of maintenance regulations also made headlines last week.

A Recap of Last Week’s Most Important Stories

1. Airline giant Air France-KLM SA reported first-half 2014 adjusted loss of €1.16 per share ($1.59), narrower than the loss of €2.32 ($3.05) incurred in the first half of 2013. Total operating revenue in the first half of 2014 came in at €12.01 billion ($16.50 billion), which declined 1.78% from the comparable period last year. Foreign exchange affected results to the tune of €287 million ($394.7 million) (read more: Air France-KLM (AFLYY-Free Report) 1H14 Loss Narrows , Revenues Drop Y/Y).

4. Low-cost U.S. airline Virgin America has finally filed a registration with the U.S. Securities and Exchange Commission (SEC.TO) to launch its Initial Public offering (IPO). The California-based carrier has well timed its IPO given a recovering U.S. aviation market (read more: Virgin America Files for IPO amid High US Airline Earnings).

5. Southwest Airlines may end up paying one of the heftiest fines ever charged by the Federal Aviation Administration (:FAA). The regulator has alleged the carrier for non-compliance of maintenance regulations in some of its 737 jetliners. The Dallas-based carrier has a months’ time to respond to the proposed charges (read more: Faulty Jet Repairs to Cost Southwest Airlines $12 Million).

2 Silver Stocks to Bedazzle This Earnings Season

Silver prices slumped 36% in 2013, from $30 per ounce to sub-$20 levels, which was even worse than the infamous 28% drop in gold prices. The fluctuating economy had clearly taken a toll on the white metal given the fact that compared to gold, silver finds more diverse use in the industry. However, contrary to gold ETFs, which suffered massive outflows during the year, silver ETFs were favored by the investors. Silver miners dealt with the low price scenario by focusing on reducing costs, layoffs, dividend cuts, trimming down exploration and capital expenditure budgets.

After the disastrous run last year, prices have reversed course in 2014 with silver gaining 8.6% in the first half, while gold gained 10%. This rise in prices was primarily attributed to increase in demand fueled by improving economic data. Silver miners have come up with strong second quarter production figures. In the first half of this year, a major positive for the industry was the sharp pick up in silver's industrial demand, which was near-flat last year.

The International Monetary Fund's (:IMF) World Economic Outlook projected growth at 3.6% for the global economy this year (up from 3% in 2013), suggesting that demand for the industrial metal will improve in tandem given its applications ranging from the semiconductor and photovoltaic industries to the ethylene oxide industry. Analysts are thus projecting slightly higher than average silver prices for 2014, with the market expected to get some strength from industrial demand, spurred by improvement in the global economy.

The silver-mining industry (which comes under the broader Basic Materials sector) has managed to produce impressive second-quarter results so far. As of now, 90.5% of the stocks in the sector have reported their numbers for the quarter, which reflects an 11.8% increase in earnings, a far better performance than a 2.6% decline witnessed in the first quarter of 2014 from the same group of companies. Notably, the Basic Materials sector has an impressive beat ratio (percentage of companies coming out with positive surprises) of 68.4% so far.

Taking into account the other companies that are yet to report their results, earnings of the Basic Material sector is expected to go up 8.9% for the second quarter. This projects a much better picture for the sector compared with the 3.8% decline in earnings in the first quarter of 2014. The sector will witness an uptrend in the back half of 2014 with expected growth of 9.2% in the third quarter and 14.2% in the fourth quarter. Overall, in 2014, the sector will log earnings growth of 8.2%, somewhat pulled down by decline in the first quarter. (For a detailed look at the earnings outlook for this sector and others, please read our Earnings Trends report.)

With the curtain set to fall on the second quarter earnings, it is wise to bet on the companies that have the potential to beat earnings in their upcoming releases. An earnings beat backed by the strong growth outlook for the sector would reinstate investor confidence in the stocks leading to immediate price appreciation.

How to Make a Choice?

With a number of players circulating the industry, picking the right stocks might appear to be a daunting task. However, the Zacks proprietary methodology makes it easier. One can narrow down the list with the potent combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) – and a positive Earnings ESP.

Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. It helps in determining stocks that have high chances of delivering earnings surprises in their next earnings announcement. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Here are two silver stocks that are likely to surprise this earnings season, as they have this compelling combination:

Headquartered in Vancouver , Canada , Fortuna Silver Mines is a silver and base metal producer focused on mining opportunities in Latin America . It has two low-cost underground operating silver mines – the Caylloma silver mine in southern Peru and the San Jose silver-gold mine located in the central portion of the state of Oaxaca , Mexico . Fortuna Silver Mines currently has a market capitalization of $691 million.

This Zacks Rank #2 stock has delivered a robust year-to-date return of 90.6%, outperforming the S&P 500 return of 5.1%. The company has projected earnings growth of 143.75% for fiscal 2014. The Zacks Consensus Estimate for the second quarter is at 5 cents and its Earnings ESP is +40.00%.

Fortuna projects its silver production to grow 30% from 4.6 million ounces in 2013 to approximately 6 million ounces in 2014. In July, Fortuna Silver Mines reported a 52% rise in its second quarter silver production to 1.6 million equivalent ounces of silver. Silver production for the quarter was 7% above budget for the Caylloma Mine and 9% above budget for the San Jose Mine.

The company has already churned up 53% of its targeted silver production for the full year, during the first half of fiscal 2014. The company is on schedule to produce its target of 6 million ounces of silver, a 30% year-over-year rise.

The expansion of the San Jose Mine's processing plant capacity from 1,800 tons per day (tpd) to 2,000 tpd was successfully completed and commissioned in the first week of April 2014. The company is now conducting necessary technical and financial analysis for the potential expansion to 3,000 tons per day. Fortuna Silver is doing a commendable job of growing resources and production as well as containing costs. Benefitting from the cost cutting measures implemented in mid-2013, the company is on track to deliver on its all-in sustaining cash cost per ounce of silver guidance for 2014 of $17.14, representing a 16% reduction compared with 2013, which bodes well for its margins.

Headquartered in Vancouver , Pan American Silver, along with its subsidiaries, operates and develops, and explores for silver. The company has seven operating mines in Mexico , Peru , Argentina and Bolivia .

This Zacks Rank #3 stock has delivered a year-to-date return of 25.7%, outperforming the S&P 500 return of 5.1%. The company with a market capitalization of $2.19 billion has a long-term expected earnings growth rate of 4%. The Zacks Consensus Estimate for the second quarter is pegged at 2 cents with an Earnings ESP of +50.00%. The estimate projects a turnaround from the loss of 7 cents per share recorded in the year-ago quarter. The company has delivered positive earnings surprises in 2 of the last 4 quarters.

Pan American has projected a production target of 25.75 million to 26.75 million ounces of silver, for 2014 and expects all-in sustaining costs per silver ounce sold (:AISCSOS) to be in the range of $17.00 to $18.00 and cash costs of $11.70 to $12.70 per silver ounce, net of by-product credits. The company remains optimistic that it will achieve or surpass its forecast for precious metals production, and also hopes to be near to the lower end of its annual guidance for AISCSOS and cash costs (provided metal prices remain near current levels).

- Pan American Silver will report its second-quarter results after the market closes on August 13.

Moving Forward

Strong emerging markets such as China and India will have a positive impact on silver as they have been increasing their imports. In addition, a buoyant U.S economy and strong industrial demand, will help silver prices to somewhat recover in 2014. A sneak peek at the space for some possible winners backed by a solid Zacks Rank and a positive Zacks Earnings ESP could be a great idea for investors to gain from this earnings season. The silver stocks appear to be finally set to provide better returns to investors.

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